SF 1287

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to real property; regulating causes of action
arising out of construction defects in residential
housing; providing for notice and opportunity to
repair; proposing coding for new law as Minnesota
Statutes, chapter 337A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [337A.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of this chapter,
the following terms have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Action. new text end

new text begin An "action" or "cause of action" means
any civil lawsuit, judicial action, or arbitration asserting a
claim in excess of $7,500, including an action under section
327A.05, in whole or in part, for damages or other relief in
connection with a dwelling, or any failure to construct a
dwelling in accordance with any applicable code, law, statute,
ordinance, or regulation, caused by an alleged construction
defect.
new text end

new text begin Subd. 3. new text end

new text begin Association. new text end

new text begin An "association" has the meaning
given in section 515.02, subdivision 5; 515A.1-103, clause (3);
or 515B.1-103, clause (4).
new text end

new text begin Subd. 4. new text end

new text begin Business day. new text end

new text begin A "business day" means Monday
through Friday, excluding any holidays as defined in section
645.44.
new text end

new text begin Subd. 5. new text end

new text begin Claimant. new text end

new text begin A "claimant" means any person who
asserts a claim relating to a construction defect.
new text end

new text begin Subd. 6. new text end

new text begin Construction defect. new text end

new text begin A "construction defect" or
"defect" has the meaning assigned by an express, written
warranty provided by a contractor, or if no express warranty
provides a definition, means a matter concerning the design,
construction, or repair of a dwelling, of an alteration of or
repair or addition to an existing dwelling, or of an
appurtenance to a dwelling, on which a person has a complaint
against a contractor. A defect includes any physical damage to
the dwelling or any appurtenance, or the real property on which
the dwelling or appurtenance is affixed, caused by a
construction defect. A "major construction defect" has the
meaning given in section 327A.01, subdivision 5.
new text end

new text begin Subd. 7. new text end

new text begin Contractor. new text end

new text begin A "contractor" means any person,
firm, partnership, corporation, or other organization that is
engaged in the business of design, development, construction,
alteration, addition to, or repair of, a new or existing
dwelling, or of an appurtenance to a new or existing dwelling.
A contractor includes an:
new text end

new text begin (1) owner, officer, director, shareholder, partner, or
employee of the contractor;
new text end

new text begin (2) subcontractors, suppliers, and other agents of the
contractor; and
new text end

new text begin (3) a risk retention group, if any, registered by law, that
insures any part of a contractor's liability for the cost to
repair a construction defect.
new text end

new text begin Subd. 8. new text end

new text begin Dwelling. new text end

new text begin A "dwelling" means a single-family
house, duplex, or multifamily unit designed for residential use
in which title to each individual unit is transferred to the
owner and shall include common areas and improvements that are
owned or maintained by an association or members of the
association. A dwelling includes the systems, other components,
improvements, other structures, or recreational facilities that
are appurtenant to the single-family house, duplex, or
multifamily unit at the time of its initial sale, but not
necessarily a part of the single-family house, duplex, or
multifamily unit.
new text end

Sec. 2.

new text begin [337A.02] NOTICE AND OPPORTUNITY TO REPAIR.
new text end

new text begin Subdivision 1. new text end

new text begin Notice. new text end

new text begin Not later than 90 business days
before filing a cause of action, the claimant must provide
written notice to the contractor. The written notice must be
served by certified mail or personal service and must describe
in sufficient detail the defect that the claimant is claiming
has occurred.
new text end

new text begin Subd. 2. new text end

new text begin Response. new text end

new text begin Within 30 business days of receipt of
the notice in subdivision 1, the contractor must provide a
written response to the claimant. The response must be served
by certified mail or personal service and must:
new text end

new text begin (1) offer to settle the claim by a monetary payment, the
making of repairs, or a combination of both; or
new text end

new text begin (2) propose to inspect the dwelling that is the subject of
the claim.
new text end

new text begin Subd. 3. new text end

new text begin Inspection; response; supplemental offer. new text end

new text begin (a)
If a proposal for inspection is made under subdivision 2, the
claimant, within 30 business days of receiving the response,
must provide the contractor with timely access to the dwelling
in order to inspect and document the claimed defect, and perform
any testing reasonably necessary to evaluate the nature, extent,
and cause of the claimed defect, and nature and extent of any
repairs or replacements that may be required to remedy the
claimed defect.
new text end

new text begin (b) Within 14 business days of completing the inspection
and testing, the contractor must provide a written response to
the claimant. The response must be served by certified mail or
personal service and must:
new text end

new text begin (1) offer to settle the claim by a monetary payment, making
repairs, or a combination of both; or
new text end

new text begin (2) state that the contractor will not proceed further to
remedy the claimed defect.
new text end

new text begin (c) Within 15 business days of receiving a claimant's
rejection of a settlement offer made under paragraph (b), the
contractor may make a supplemental offer to settle the claim by
a monetary payment, making repairs, or a combination of both.
new text end

new text begin Subd. 4. new text end

new text begin Offer to make repairs. new text end

new text begin Any offer under
subdivision 2 or 3 to remedy the claimed defect by making
repairs shall include a detailed description of additional
construction necessary to remedy the defect and an anticipated
timetable for the completion of the construction.
new text end

new text begin Subd. 5. new text end

new text begin Acceptance of settlement offer. new text end

new text begin (a) If the
claimant accepts a settlement offer made in subdivision 2 or 3,
including a supplemental offer, the claimant must provide
written notice of the acceptance. The acceptance must be served
by certified mail or personal service within 30 business days of
receipt of the offer. The claimant may not file an action
without responding to the settlement offer within 30 business
days of receipt of the offer.
new text end

new text begin (b) If the claimant accepts an offer to repair, the
claimant must provide the contractor with timely access to the
dwelling to complete the construction by the timetable agreed
upon in the settlement offer.
new text end

new text begin (c) If a claimant accepts, and a contractor performs in
accordance with, a settlement offer made under this section:
new text end

new text begin (1) the claimant is thereafter barred from bringing an
action involving the defect. If a subsequent defect is alleged,
the claimant must provide notice to the contractor as provided
by subdivision 1; and
new text end

new text begin (2) the contractor is deemed to have been legally obligated
to make the repairs or monetary payment as if the claimant had
recovered a judgment against the contractor in the amount of the
cost of repairs or monetary payment, or a combination of both.
new text end

new text begin Subd. 6. new text end

new text begin Rejection of claim; failure to respond; failure
to provide notice. new text end

new text begin The claimant may, without further notice,
file a cause of action if the contractor:
new text end

new text begin (1) rejects the claim and will neither remedy the defect or
settle the claim as provided in subdivision 2 or 3;
new text end

new text begin (2) fails to serve a response to the claimant as required
by subdivision 2 or 3; or
new text end

new text begin (3) fails to provide the notice required by section 337A.03.
new text end

new text begin Subd. 7. new text end

new text begin Rejection of settlement offer. new text end

new text begin (a) If the
claimant rejects a settlement offer made in subdivision 2 or 3,
including a supplemental offer, the claimant must provide
written notice of the rejection prior to commencing an action.
The rejection must be served by certified mail or personal
service within 30 business days of receipt of the offer and must
specify the reasons known to the claimant for the rejection. If
the claimant believes the settlement offer omitted reference to
any portion of the claim, or was unreasonable in its terms, the
claimant must set forth those items of the claim the claimant
believes were omitted or why the settlement offer was
unreasonable.
new text end

new text begin (b) In an action subsequently brought, if the court or
arbitrator determines that the contractor has made a good faith
and reasonable offer of settlement of the claim under
subdivision 2 or 3, and that the claimant has rejected the
offer, the claimant may not recover an amount in excess of the
written settlement offer.
new text end

new text begin Subd. 8. new text end

new text begin Failure to comply. new text end

new text begin If a claimant accepts a
settlement offer pursuant to this section, and the contractor
fails to make the monetary payment or remedy the defect within
the agreed timetable, the claimant may, without further notice,
file a cause of action. The claimant may also file the
settlement offer and acceptance which will create a rebuttable
presumption that a binding and valid settlement agreement has
been created and should be enforced by the court or arbitrator.
new text end

new text begin Subd. 9. new text end

new text begin Additional defects. new text end

new text begin A defect that is discovered
after the claimant has provided the original claim notice under
subdivision 1 may not be alleged in an action until the claimant
has provided the required notice and the contractor has been
given opportunity to respond, as provided by this section.
new text end

Sec. 3.

new text begin [337A.03] CONTRACT FOR SALE.
new text end

new text begin A contractor must include, in every contract for the sale
of a dwelling to be completed and in every contract for the sale
of home improvement work, the notice required by this section.
The notice must be in at least 10-point bold type, if printed,
or in capital letters, if typewritten, and must state as follows:
new text end

new text begin "Minnesota law contains important procedures and
requirements you must follow before you may file a lawsuit for
defective construction against the contractor who constructed,
or performed construction on, your home. Failure to follow
these procedures and requirements may affect your ability to
file a lawsuit. You must serve a written notice on the
contractor of any construction conditions you believe to be
defective 90 business days before you file your lawsuit. A
contractor has the opportunity to make an offer to repair or pay
for the defects. You are not obligated to accept an offer made
by a contractor."
new text end

Sec. 4.

new text begin [337A.04] DISMISSAL; RELATION TO OTHER LAWS.
new text end

new text begin (a) Except as provided in paragraph (b) or (c), if a
claimant has not complied with section 337A.02 before filing a
cause of action, the court or arbitrator with whom the action
has been filed shall dismiss the cause of action without
prejudice. The action may not be refiled until the claimant has
complied with section 337A.02.
new text end

new text begin (b) An action that includes a cause of action for damages
due to personal injury or death is not subject to dismissal
under section 337A.02.
new text end

new text begin (c) A claimant may file an action if delay would preclude
the action from being brought by section 541.051. However, the
court or arbitrator shall stay the proceedings pending
compliance with this section. This subdivision shall not be
construed to revive or extend any applicable statute of
limitation or repose periods set forth in section 541.051. This
section does not negate a claimant's duty to report loss or
damage as required by section 327A.03, clause (a).
new text end

new text begin (d) Nothing in this chapter creates a cause of action on
behalf of a claimant or contractor. Nothing in this chapter
limits a contractor's right to seek contribution, indemnity, or
recovery against a subcontractor, material supplier, or design
professional for any claim made against a contractor.
new text end

new text begin (e) Nothing in this chapter diminishes or enlarges the
rights or responsibilities of a claimant or of an insurer,
pursuant to contract or by law under any insurance contract. If
a contractor requests that its insurer indemnify the contractor
against a claim made in accordance with this chapter, the
insurer shall complete its investigation and inform the insured
contractor of acceptance or denial of the claim within 30
business days after receipt of notification of claim, as
required by section 72A.201, subdivision 4. If an insurer fails
to accept or deny a claim within 30 business days after receipt
of notification of the claim, the insurer waives its rights to
claim that the insured contractor's subsequent efforts to
resolve the claim violated the insurance contract's conditions
or prejudiced the insurer in any way.
new text end

Sec. 5.

new text begin [337A.05] LIMITATION.
new text end

new text begin In any action relating to a dwelling involving a
construction defect, a contractor is not liable for:
new text end

new text begin (1) loss or damage described in section 327A.03;
new text end

new text begin (2) damages caused by the contractor's reliance on the
written directive of a local or state building official;
new text end

new text begin (3) damages involving a construction defect known by or
disclosed to the claimant before the claimant's purchase of the
dwelling, or that could have been discovered by the claimant
through the exercise of reasonable diligence before the
claimant's purchase of the dwelling; or
new text end

new text begin (4) refusal by the claimant or predecessor claimant to
permit the contractor to perform warranty service work.
new text end

Sec. 6.

new text begin [337A.06] ACTIONS OF HOMEOWNER ASSOCIATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Prohibition. new text end

new text begin (a) No person shall provide
or offer to provide anything of value, directly or indirectly,
to a property manager, member, or officer of an association, to
encourage or discourage the association to file an action for
damages arising from a construction defect.
new text end

new text begin (b) No property manager, member, or officer of an
association shall accept anything of value, directly or
indirectly, in exchange for encouraging or discouraging the
association from filing an action for damages arising from a
construction defect.
new text end

new text begin (c) Violation of this subdivision is a misdemeanor.
new text end

new text begin Subd. 2. new text end

new text begin Action. new text end

new text begin No association may bring an action for
damages arising from a construction defect against a contractor
unless:
new text end

new text begin (1) the action involves the common elements or limited
common elements of the common interest ownership community;
new text end

new text begin (2) the association obtains the written approval of each
unit's owner whose interest in the common elements or limited
common elements is the subject of the action;
new text end

new text begin (3) a vote of the units' owners to which at least a
majority of the votes of the members of the association are
allocated;
new text end

new text begin (4) the full board of directors of the association and the
contractor have met and conferred in a good faith attempt to
resolve the association's claim, or the contractor has declined
or ignored the requests to meet with the board of directors of
the association; and
new text end

new text begin (5) the association has complied with this chapter.
new text end

new text begin Subd. 3. new text end

new text begin Vote. new text end

new text begin (a) At least three business days in
advance of voting to bring an action against a contractor, the
attorney representing the association shall provide each unit's
owner a written statement that includes, in reasonable detail:
new text end

new text begin (1) the defect and the nature and extent of damages or
injuries to the common elements or limited common elements
resulting from the defect, if known;
new text end

new text begin (2) the cause and location of the defect, if known;
new text end

new text begin (3) an estimate of the cost of the action, including
reasonable attorney's fees, costs, and fees, including expert
and testing fees; and
new text end

new text begin (4) all disclosures that the unit owner is required to make
upon sale of the unit.
new text end

new text begin (b) At least 21 calendar days in advance of voting to bring
an action against a contractor, the association must provide
written notice of each unit owner of the meeting at which the
vote will be considered.
new text end

new text begin Subd. 4. new text end

new text begin Testing. new text end

new text begin An association or an attorney for an
association shall not employ a person to perform testing to
determine damage or injury to a unit, common element, or limited
common element, unless:
new text end

new text begin (1) the person is licensed under chapter 326;
new text end

new text begin (2) the association has obtained the prior written approval
of each unit's owner whose interest in the common elements or
limited common elements is the subject of the action;
new text end

new text begin (3) the person performing the tests is required to repair
all damage resulting from the test in accordance with state and
local law and has provided a written schedule for repairs; and
new text end

new text begin (4) prior notice and opportunity to observe the test is
given to the contractor against whom an action may be brought as
a result of the tests.
new text end

new text begin Subd. 5. new text end

new text begin Exception. new text end

new text begin The board of directors of an
association may, without giving notice, employ a contractor to
make immediate and necessary repairs to a unit or common element
within the common interest ownership community in order to
protect the health, safety, and welfare of the unit owners.
new text end

Sec. 7. new text begin EFFECTIVE DATE.
new text end

new text begin This act is effective the day following final enactment and
applies to all actions commenced on or after that date.
new text end